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How the underused housing tax may affect owners of residential property in Canada


Effective Jan. 1, 2022, Canada now levies a 1% tax on vacant or underused residential real estate owned by non-Canadians. If you own residential property in Canada, you may be impacted by this tax and the related filing requirements.

This article explores the underused housing tax (UHT) filings that may need to be considered by non-Canadians who legally own Canadian residential real estate on Dec. 31:

  • personally;
  • through a private corporation;
  • through a partnership; or
  • in a trust or estate.

In this context, non-Canadian individual refers to individuals who are not citizens or permanent residents of Canada (as defined under the Immigration and Refugee Protection Act). An individual can be resident of Canada for income tax purposes, and still be subject to UHT if they are not a citizen or permanent resident of Canada. The UHT covers a significant range of taxpayers, resulting in a filing requirement for many entities such as private corporations, partnerships, trusts, and estates.

What types of property are taxable?

Residential properties that are subject to the UHT include:

  • A detached house or similar building that contains not more than three dwelling units, along with any real property improvements (i.e., fences etc. and the related land):
    • Dwelling unit includes a residential unit that contains private kitchen facilities, a private bath, and a private living area.
    • A residential unit is a single self-contained set of rooms in a building or part of a building that is distinguished from any other such set of rooms in the building or part and that is characteristic of, and suitable as, a residence.
  • A semi-detached house, rowhouse unit, residential condominium unit or other similar premises, along with any common areas, real property improvements i.e., fences etc. and the related land.
  • Laneway and coach houses.
  • Cottages, cabins, and chalets.

For example, a residential apartment building with four residential units that do not each have separate title is not considered residential property under the UHT, but a three-unit apartment building (a triplex) would be residential property under the UHT.

Targeted individuals

If you own a residential property in Canada and are not a Canadian citizen or permanent resident, you may be an owner who holds property for investment purposes. Where the property is not used by you, or not rented, or it is rented short-term, such as an Airbnb, it is likely that the UHT will apply.

If you are not a Canadian citizen or a permanent resident of Canada for immigration purposes, but you own and occupy a home in Canada because you or your spouse are pursuing authorized work under a Canadian work permit, you can apply for an occupancy exemption. See the Property used as a place of residence section below. You may also qualify for a primary place of residence exemption.

If you are not a Canadian citizen or a permanent resident and you own a vacation property in Canada, there is a special exemption where that property is in a designated area. See the Location of the property section below. In addition, the occupancy exemption may be available.

Who has a filing and payment obligation?

There are two categories of property owners under the UHT: excluded and affected owners.

An excluded owner does not have a filing or payment obligation under the UHT.

The UHT defines an excluded owner of a residential property on Dec. 31 as:

  • An individual who is a Canadian citizen or permanent resident who owns the property in their name and not as a trustee or as a partner in a partnership.
  • Individual who is a Canadian citizen or permanent resident who owns the property in their capacity as the personal representative of a deceased person.
  • An owner of a residential property as a trustee of any of the following trusts—a mutual fund trust, real estate investment trust, or specified investment flow-through trust (SIFT).
  • A Canadian corporation whose shares are listed on a Canadian stock exchange designated for Canadian income tax purposes.
  • A registered charity for Canadian income tax purposes.
  • Cooperative housing corporation, hospital authority, municipality, para-municipal organization, public college, school authority, or university for Canadian GST/HST purposes.
  • Indigenous governing body or a corporation wholly owned by an Indigenous governing body.

An affected owner is required to file and pay the tax under the UHT unless they qualify for an exemption. If an affected owner qualifies for an exemption, they are still required to file a UHT return and claim the exemption, but there is not an obligation to pay the tax.

Anyone who does not meet the definition of an excluded owner (see above) is an affected owner for the purposes of the UHT.

This article does not address the filings required by Canadian owners (individuals who are Canadian citizens or permanent residents, certain Canadian corporations, partnerships, and trusts) who own Canadian residential property. Read our article, Underused housing tax program: Considerations for Canadian corporations, partnerships, and trusts, to learn more about the impact of UHT on Canadian owners.

Owners of residential property who are:

  • corporations that are not incorporated or continued into Canada,
  • trustees of a trust that has beneficiaries that are not citizens or permanent residents of Canada, and
  • certain partners of partnerships

will also be required to determine if they need to file a UHT return, and either pay UHT or claim an exemption.

The UHT applies to affected owners of Canadian residential real estate on title on Dec. 31. The 2022 calendar year is the first year that this tax applies. To determine your liability under the UHT a review of the exemptions must be undertaken.

What exemptions are available?

A residential property may qualify for an exemption under the UHT if certain conditions are met. All affected owners who qualify for an exemption are required to file a UHT return.

The UHT provides an exemption to the following owners:

  • Specified Canadian corporations are corporations that are incorporated or continued under the laws of Canada or a province that on Dec. 31 are at least 90% (by value of the equity or voting rights) owned by:
    • Individual Canadian citizens or permanent residents.
    • A corporation that is incorporated or continued under the laws of Canada or a province
    • A combination of the above.
  • Partners of a specified Canadian partnership.
  • A trustee of a specified Canadian trust.
  • A deceased owner, or a co-owner or personal representative of a deceased owner.

There are also exemptions if the property is the primary place of residence or if it has a qualified occupancy.

An exemption applies only for individual owners, where the residential property is their primary place of residence (on a worldwide basis, not just in Canada). In this context primary refers to a main residence and not a secondary residence. This exemption could also apply where the child of an owner or their spouse or common-law partner occupies the home for the purpose of attending a designated learning institution (DLI) and occupies the residence as their main place of residence. A DLI is a school approved by a provincial or territorial government to host international students. All primary and secondary schools in Canada are DLIs, as are many colleges, universities, and trade schools.

The qualified occupancy exemption may be available for individual owners if the primary place of residence exemption doesn't apply, or if the owner or their spouse/common-law partner own more than one residential property in Canada. The qualified occupancy exemption is also available to property held by a corporation, partnership, or trust.

In general, if the residential property meets a qualifying occupancy period test (i.e., it is occupied by qualifying occupants for at least 180 days in a calendar year an exemption can be claimed). Short-term occupancies of less than a month do not count towards the 180 days. Qualifying occupants include:

  • An arm's length tenant who has a written contract (i.e., a lease agreement).
  • A non-arm's length tenant who pays at least fair rent for the property under an agreement in writing.
  • An individual or their spouse or common-law partner who has a Canadian work permit and who lives in that residence due to working in Canada.
  • An individual or their spouse or common-law partner, parent, or child who is a Canadian citizen or permanent resident.

A UHT exemption is available for residential property that is inaccessible seasonally due to a lack of public access. For example, this would include a seasonal cottage where public access is not maintained year-round. In addition, owners of seasonal properties that are not suitable for year-round use also be eligible for exemption.

An exemption from UHT can be claimed if either of these conditions apply:

  • The property is uninhabitable for at least 60 consecutive days in the calendar year because of a disaster or hazardous condition that is beyond the owner's control.
  • The property is uninhabitable for at least 120 consecutive days in the calendar year due to renovations.

A vacation property located in a prescribed area and that is used as a place of residence or lodging by the owner or the owner's spouse or common-law partner for at least 28 days during the calendar year may be able to claim an exemption from the UHT. This determination of whether a property is in a prescribed area is partially based on its Canadian postal code. The CRA's Underused housing tax vacation property designation tool is helpful in determining whether a property is in a prescribed area.

Certain other exemptions are available where the property is newly acquired, or newly constructed.


An election to designate one property as a primary residence may be filed to by an individual and/or their spouse/common-law partner if they own two or more residential properties in Canada during a calendar year. Not more than one election may be made by the individual and the individual's spouse/common-law partner for the calendar year. However, if they make this election, they will not be able to claim the occupancy exemption on the other property with respect to their occupancy.

UHT calculation

UHT is calculated by affected owners at 1% of the taxable value of the residential property.

The taxable value is calculated to be the greater of the assessed value or the residential property’s most recent sale price on or before Dec. 31 of the calendar year.

UHT can be calculated using the fair market value (FMV) of the residential property instead, but an election is required to filed to use the FMV methodology.


Affected owners who fail to file the UHT return by the due date will be subject to significant penalties. The penalty will apply if a UHT return is not filed by April 30 (May 1, 2023 for 2022 since April 30 falls on a Sunday this year).

These penalties would be applied even if the affected owners qualify for an exemption. The minimum late filing penalty is $10,000 where the owner is not an individual or $5,000 where the owner is an individual.

The penalty will be greater if taxes are owing and will be the total of:

  • 5% of UHT payable for the residential property for the calendar year; and
  • 3% of UHT payable for the residential property for the calendar year multiplied by the number of complete calendar months that the filing of the return is late.

There is a second level of penalties that may apply if the return is not filed by Dec. 31 of the subsequent year (by Dec. 31, 2023 for 2022 returns) in that the penalty will be calculated as if the exemptions (as outlined below) are not allowed for the purpose of the late filing penalty. The change in the calculation of the penalty will only be applicable to affected owners who claimed one of the following exemptions for the calendar year:

  • Properties that cannot be used throughout the year
  • Uninhabitable properties
  • Primary place of residence
  • Qualifying occupancy

The legislation provides that a penalty, if charged, may be waived by the government within 10 years of the calendar year to which the penalty applies. However, in this case, a general penalty of $250 will apply.

In addition to these penalties, when a non-resident of Canada plans to sell Canadian real property, including residential real estate, the vendor will usually request a certificate of compliance from the CRA and pay to the CRA 25% of the gain on the sale of the property. If the purchaser does not see such a certificate, they can withhold an amount of the proceeds (usually 25% of the purchase price of the property) and provide this to the CRA.

Starting in 2023, an application for a certificate of compliance with respect to Canadian residential property will prompt a compliance review by the CRA in relation to the UHT. The CRA is not required to issue a certificate of compliance to an applicant if they are not satisfied that the applicant is in compliance with any applicable obligations under the UHT. (Note that non-resident in this context is with respect to income tax rules).

Filing the UHT return

It will be possible to file this form electronically or on paper.

It will be necessary to have a valid CRA tax identifier number to file a UHT return. The following tax identifier numbers may be used depending on the situation:

  • Social insurance number (SIN)
  • Individual tax number (ITN); the CRA provides an ITN to individuals who are not eligible for a SIN
  • Canadian business number (BN) with a UHT program account identifier code

A trust account number (TAN) cannot be used to file UHT returns—it is the trustee who must make the filing where a trust holds property for which UHT can be is applicable.

How BDO can help

Watch now: Underused housing tax (UHT) webinar

If you are a non-resident Canadian residential property owner, we can help you navigate these rules and determine whether a UHT return will be due by May 1, 2023. Act now as the filing deadline for 2022 is fast approaching.

Contact us or one of the BDO advisors below to find out how we can help.

Brian Morcombe, Partner, Indirect Tax Practice Leader

Jay Tulsani, Senior Manager, Indirect Tax

The information in this publication is current as of February 13, 2023.

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO Canada LLP to discuss these matters in the context of your particular circumstances. BDO Canada LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

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